Hold the phone no more?

Motorola iTunes line may finally be shown

July 25, 2005|By Mike Hughlett, Tribune staff reporter

A year ago, Motorola Inc. Chief Executive Edward Zander kicked off his inaugural stock analyst meeting with a big announcement: The company was partnering with Apple Computer Inc. to create a one-of-a-kind music phone.

This week, Zander is set to host his second annual analyst meeting, and wireless watchers expect that the much-awaited iTunes phone will be formally unveiled--finally.

Motorola, the world's second-largest maker of mobile phones, was set for a grand preview of its first iTunes model in March before canceling at the last minute. The postponement has been alternatively attributed to Apple and wireless phone networks.

Whatever the reason, the music phone field has become increasingly crowded in the intervening months.

Motorola's main rival, Nokia, has unveiled its flagship music phone, the N91, which will rival Apple's iPod Mini in storage capacity. It's due in stores by early 2006. Meanwhile, Sony Ericsson is slated to roll out a music phone under the famous Walkman brand later this year.

Zander doesn't seem worried, scoffing at the notion that the iTunes phone has lost some front-runner sheen. "We think we are way out front still," he said. "Nobody will have the compelling user experience we will have."

So will Zander be lifting the curtain on the iTunes by Tuesday when he hosts this year's analyst gathering in Rosemont? Well, he hinted at it, but wouldn't quite say.

"We'll have a lot of music stuff for you [this] week," Zander said.

Several stock analysts said they expect the iTunes phone to be unveiled. "I'd be surprised if it wasn't," said Mike Walkley, an analyst at Piper Jaffray & Co.

The iTunes phone may be getting more than its fair share of hype. But then, music phones are expected to be a big hit for the wireless phone industry. And the iTunes phone is linked to Apple, a hot company with a runaway hit: the iPod portable music player.

The iPod's success has turned Apple's online music store, iTunes, into a dominant force in digital music. And the Motorola-Apple venture will produce the first non-iPod devices enabled to play music on the go using the iTunes software.

The first iTunes phone, dubbed the E790, was to be previewed at a European electronics trade show in March. Motorola went so far as to send embargoed pictures of the phone to the media. It was a candy-bar model sporting a display screen akin to the iPod.

Schaumburg-based Motorola's official reason for the postponement: Apple wanted the phone to be unveiled closer to when it hit store shelves. But there's been much speculation among analysts that Motorola has had trouble getting wireless carriers lined up behind iTunes.

Most phones are sold through carriers like Cingular and Verizon. By bundling phones with a calling plan, carriers subsidize the price of the devices to consumers.

Carriers make more money when customers use their phones to send pictures or data, or download content like songs. But if iTunes phone users just download tunes from their computers, not the phone network, then Apple gets the revenue.

Other phonemakers face similar issues. Suzanne Cross, a product marketing manager for Sony Ericsson, said she expects that initially, most music phone users will download from their computers.

"Until [consumers] are used to mobile phones as music devices, they are not going to just download [from phone networks]." But they will eventually get used to it and wireless networks realize that, she said.

Sony Ericsson announced a Walkman phone last winter, and in June unveiled the W600 model aimed at North America. It's expected to cost less than $250 and hold up to 120 songs.

Meanwhile, Nokia, the world's largest maker of wireless phones, previewed the N91 in April. It is equipped with a hard drive that has a 3,000-song storage capacity. The N91 will likely be more expensive than the Walkman and the initial iTunes phone, but it will have far greater song storage capacity than both.

Nokia is also working on an online music store--one that takes a very different tack than Motorola's iTunes venture. The Finnish company has teamed with Loudeye, a Seattle firm that creates digital stores.

Industry executives and observers expect the marriage of music and mobile phones to take off in 2006, especially as wireless operators complete their rollout of new networks. Download speeds will be much faster for music, video and data.

"This is really a 2006 opportunity," said Loudeye Chief Executive Mike Brochu. But when music takes hold, "I believe it will take off quickly."

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Wireless music ventures

- Phone equipment-maker LM Ericsson and online music store Napster have teamed up to offer a mobile version of Napster. It's expected to roll out in Europe by the end of the year.

- Sprint is offering radio through digital music services MusicChoice and MSpot. It costs $5.95 per month and is available on six phones. Sprint also last month signed a deal with satellite radio provider Sirius.

- Rogers Communications, Canada's largest wireless operator, recently became the first North American carrier to offer full-song downloads onto phones and computers. The service can be used on Nokia's 6620 phone. Songs downloaded to phones cost $2.99.

- Verizon Wireless, the largest U.S. wireless carrier, plans to launch an online music store within six to eight months.